After looking at CEI Limited’s (SGX:AVV) latest earnings announcement (31 December 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Did AVV’s recent earnings growth beat the long-term trend and the industry?
AVV’s trailing twelve-month earnings (from 31 December 2018) of S$7.4m has jumped 14% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.4%, indicating the rate at which AVV is growing has accelerated. How has it been able to do this? Let’s see if it is merely because of an industry uplift, or if CEI has experienced some company-specific growth.
In terms of returns from investment, CEI has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 11% exceeds the SG Electronic industry of 4.1%, indicating CEI has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for CEI’s debt level, has declined over the past 3 years from 33% to 23%.
What does this mean?
Though CEI’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research CEI to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AVV’s future growth? Take a look at our free research report of analyst consensus for AVV’s outlook.
- Financial Health: Are AVV’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2018. This may not be consistent with full year annual report figures.
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